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OtPT 
WAR  13 1917 


The  Excess  Profits 
Tax  Law 

Act  Approved  March  3,  1917 


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Guaranty  Trust  Company 
of  New  York 


The  Excess  Profits 
Tax  Law 

Act  approved  March  3,  1917 


Guaranty  Trust  Company 
of  New  York 

140  Broadway 

Fifth  Avenue  Office 
Fifth  Avenue  and  43d  Street 

London  Office  Paris  Office 

32  Lombard  Street,  E.  C.  Rue  des  Italiens  1  &  3 

(Opens  May,  1917) 


■t- 


^i€<A 


COPYRIGHT,  1917 
BY  GUARANTY  TRUST  COMPANY  OF  NEW  YORK 


Contents 

PAGE 

Foreword 

5 

Synopsis  of  Law 

7 

Full  Text  of  Law 

14 

355987 


Digitized  by  the  Internet  Arcinive 

in  2008  witin  funding  from 

IVIicrosoft  Corporation 


littp://www.arcliive.org/details/excessprofitstaxOOguarricli 


Foreword 

The  tax  on  excess  profits  is  in  addition  to  all 
taxes  heretofore  imposed,  and  is  eight  per  cent- 
um upon  the  amount  of  annual  net  income  in 
excess  of  the  sum  of  $5,000  and  eight  per 
centum  of  the  actual  capital  invested. 

For  example,  a  domestic  corporation  having 
$200,000  actual  capital  invested,  and  $40,000 
annual  net  earnings,  would  calculate  the  amount 
of  its  tax  as  follows : 


Net  annual  income 

$40,000 

Amount  exempt: 

Specific  exemption 

$5,000 

8%  of  $200,000 

16,000 

Total  exemption 

$21,000 

Balance  subject  to  8%  tax 

$19,000 

Amount  of  Tax 

$1,520 

Foreign  corporations  and  partnerships,  as  well 
as  resident  corporations  and  partnerships,  are 
subject  to  the  tax,  except  that  the  tax  is  assessed 
against  foreign  corporations  and  partnerships 
only  on  income  received  from  sources  within  the 
United  States,  and  exemptions  are  allowed  pro- 
portionately. 

Net  income,  as  shown  by  corporations  on 
returns  filed  pursuant  to  the  provisions  of  the 

[5] 


Income  Tax  Law,  Act  of  September  8,  1916,  is 
used  as  the  basis  for  the  assessment  of  the  tax 
and  returns  filed  for  the  year  of  1917,  by  cor- 
porations having  a  net  income  in  excess  of 
$5,000,  shall  include  a  full  statement  of  capital 
invested.  Partnerships  having  a  net  income  of 
$5,000,  or  over  must  file  returns  setting  forth  the 
actual  capital  invested  and  the  gross  income  for 
the  taxable  year.  For  the  purpose  of  computing 
net  income,  partnerships  are  allowed  the  same 
deductions  allowed  individuals  under  Sections 
five  and  six  of  the  Income  Tax  Law. 

Corporations  exempt  from  the  Federal  In- 
come Tax  and  partnerships  similarly  engaged 
are  exempt  from  taxation  under  the  Excess 
Profits  Tax  Law.  Partnerships  whose  income 
is  derived  from  agriculture  or  from  personal 
services  are  also  exempt. 

The  first  taxable  year  is  the  calendar  year  end- 
ing December  thirty-first,  1917,  but  corporations 
and  partnerships  having  a  fiscal  year  other  than 
the  taxable  year  provided  by  law  may  make 
returns  for  their  fiscal  year  in  accordance  with 
the  provisions  of  the  Income  Tax  Law. 

March  3,  1917 

[6] 


Synopsis  of 

The  Excess  Profits  Tax  Law 

/.     Definitions — (Sec.  200). 

1.  "Corporation" — the  term  "corporation" 
includes  joint  stock  companies  or  associ- 
ations, and  insurance  companies. 

2.  "United  States"— the  term  "United 
States"  means  only  the  States,  the  Terri- 
tories of  Alaska  and  Hawaii,  and  the  Dis- 
trict of  Columbia. 

3.  "  Taxable  Year" — the  term  "taxable  year" 
means  twelve  months  ending  December 
thirty-first,  except  in  the  case  of  a  corpora- 
tion or  partnership  allowed  to  fix  its  own 
fiscal  year,  in  which  case  it  means  such 
fiscal  year. 

4.  "First  Taxable  Year"— the  "first  taxable 
year"  shall  be  the  year  ending  December 
thirty-first,  nineteen  hundred  and  seven- 
teen. 

[7] 


11.     Corporations  and  Partnerships  subject  to 
Tax— (Sec.  201). 

1.  Domestic  corporations  and  partnerships 

are  subject  to  a  tax  of  8  per  centum  on  the 
amount  by  which  the  net  income  exceeds 
the  sum  of  (a)  $5,000  and  (b)  8  per  centum 
of  the  actual  capital  invested. 

Excerption — Income  derived  from  business 
of  life,  health  and  accident  insurance 
combined  in  one  policy  on  weekly  pay- 
ment plan  is  exempt. 

2.  Foreign  corporations  and  partnerships 
including  those  located  in  the  Philippine 
Islands  and  Porto  Rico  are  subject  to  tax 
as  follows: 

a.  Where  actual  capital  is  invested  and 
used  or  employed  in  the  business  in 
the  United  States,  a  tax  of  8  per 
centum  upon  the  amount  of  net  in- 
come received  from  all  sources  with- 
in the  United  States  in  excess  of  the 
sum  of  (1)  8  per  centum  of  the  actual 
capital  invested  and  used  or  em- 
[8] 


ployed  in  the  business  in  the  United 
States,  and  (2)  that  proportion  of 
$5,000,  which  the  entire  actual 
capital  invested  and  used  or  em- 
ployed in  the  business  in  the  United 
States  bears  to  the  entire  actual 
capital  invested. 

b.  Where  no  actual  capital  is  used  or 
employed  in  the  business  in  the 
United  States,  a  tax  of  8  per  centum 
upon  that  portion  of  net  income 
received  from  sources  within  the 
United  States  in  excess  of  the  sum 
of  (1)  8  per  centum  of  that  propor- 
tion of  the  entire  actual  capital 
invested  and  used  or  employed  in 
the  business  which  the  net  income 
from  sources  within  the  United 
States  bears  to  the  entire  net  income, 
and  (2)  that  proportion  of  $5,000, 
which  the  net  income  from  sources 
within  the  United  States  bears  to 
the  entire  net  income. 

[9] 


III.  Actual     Capital     Invested     Includes  — 

{Sec.  202). 

1.  Actual  cash  paid  in, 

2.  Actual  cash  value,  at  the  time  of  payment, 
of  assets  other  than  cash  paid  in,  and 

3.  Paid  in  or  earned  surplus  and  undivided 
profits  used  or  employed  in  the  business. 

4.  Provided  that  money  or  property  borrowed 

shall  not  be  included. 

IV.  Net  Income— {Sec.  203). 

1.  Tax  shall  be  computed  on  the  basis  of  net 
income  shown  by  income  tax  return  made 
in  pursuance  of  the  Income  Tax  Law,  Act 
of  Congress  lapproved  Sept.  8,  1916,  and 
shall  be  assessed  and  collected  at  the  same 
time  and  in  the  same  manner. 

2.  A  partnership  shall  have  the  same  privi- 
lege with  respect  to  fixing  its  fiscal  year  as 
a  corporation  under  the  Income  Tax  Law. 

3.  Where  a  corporation  or  partnership  makes 
return  prior  to  March  1,  1918,  covering  its 

[10] 


own  fiscal  year,  and  includes  therein  any 
income  received  during  the  calendar  year 
ending  December  31, 1916,  the  tax  shall  be 
that  proportion  of  the  tax  based  upon  such 
full  fiscal  year  which  the  time  from  Janu- 
ary 1,  1917,  to  the  end  of  such  fiscal  year 
bears  to  the  full  fiscal  year. 

V.  Corporations  and  Partnerships  Exempt — 

{Sec.  204). 

1.  Corporations  exempt  from  tax  under  Sec- 

tion 11,  Federal  Income  Tax  Law. 

2.  Partnerships  doing  or  carrying  on  the  same 

business  as  exempt  corporations,  and 

3.  Partnerships  whose  income  is  derived  from 
agriculture  or  from  personal  services  are 
exempt  from  the  provisions  of  the  Excess 

Profits  Tax  Law. 

VI.  Returns— (Sec.  205). 

1.  Corporations — Every  corporation  having  a 
net  income  of  $5,000,  or  more,  for  the  tax- 
able year  shall  include  in  its  income  tax 

[11] 


return  a  detailed  statement  of  the  actual 
capital  invested. 
2.  Partnerships — ^Every  partnership  having  a 
net  income  of  $5,000  or  more  for  the  tax- 
able year  shall  file  a  return  setting  forth 
specifically  the  actual  capital  invested  and 
the  gross  income  for  the  taxable  year.  For 
the  purpose  of  computing  net  income,  part- 
nerships shall  be  allowed  like  deductions  as 
are  allowed  to  individuals  under  Sections 
5  and  6  of  the  Income  Tax  Law,  Act  of 
Congress  approved  September  8, 1916. 

VII.  Assessment,  Remission,  Collection  and 
Refund  of  Taxes — (Sec.  206). 
All  administrative,  special  and  general 
provisions  of  law,  including  the  laws  in  re- 
lation to  the  assessment,  remission  collec- 
tion, and  refund  of  internal  revenue  taxes 
not  inconsistent  with  the  provisions  of  this 
Law,  and  likewise  all  provisions  of  the  In- 
come Tstx  Law  relating  to  returns  and  pay- 
ment of  the  tax  imposed,  including  pro- 
visions relating  to  penalties,  are  made  ap- 
plicable to  taxes  required  by  this  law. 
[12] 


VIII.     Regulations    of  the  Commissioner  of 
Internal  Revenue — (Sec.  207). 

The  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  make  all  necessary  regula- 
tions for  carrying  out  the  provisions  of  the 
Law,  and  may  require  any  corporation  or 
partnership  subject  to  the  provisions  of  the 
Law  to  furnish  him  with  such  facts,  data 
and  information  as  are  necessary  to  collect 
the  tax. 


[13] 


Definitions 

"Corpor- 
ation" 


"United 
States" 


"Taxable 
Year" 


"First 

Taxable 

Year" 


Taxable 
Income 


The 
Excess  Profits  Tax  Law 

Title  II  of  an  Act  entitled  "An  Act  to  provide  increased 
revenue  to  defray  the  expenses  of  the  increased  appropri- 
ations for  the  Army  and  Navy  and  the  extensions  of  fortifi- 
cations, and  for  other  purposes,"  Approved  March  3,  1917. 

Sec.  200.  That  when  used  in  this  title — 

The  term  "corporation"  includes  joint-stock 
companies  or  associations,  and  insurance  com- 
panies; 

The  term  *' United  States"  means  only  the 
States,  the  Territories  of  Alaska  and  Hawaii,  and 
the  District  of  Columbia;  and 

The  term  "taxable  year"  means  the  twelve 
months  ending  December  thirty-first,  except  in 
the  case  of  a  corporation  or  partnership  allowed 
to  fix  its  own  fiscal  year,  in  which  case  it  means 
such  fiscal  year.  The  first  taxable  year  shall  be 
the  year  ending  December  thirty-first,  nineteen 
hundred  aind  seventeen. 

Sec.  201.  That  in  addition  to  the  taxes  under 
existing  laws  there  shall  be  levied,  assessed,  col- 
lected, and  paid  for  each  taxable  year  upon  the 
net  income  of  every  corporation  and  partnership 
organized,  authorized,  or  existing  under  the  laws 
of  the  United  States,  or  of  any  State,  Territory, 
or  District  thereof,  no  matter  how  created  or 
organized,   excepting  income  derived  from   the 

[14] 


business  of  life,  health,  and  accident  insurance  Domestic 
combined  in  one  policy  issued  on  the  weekly  Corporations 
premium  payment  plan,  a  tax  of  eight  per  centum  g^-  g         ®^" 
of  the  amount  by  which  such  net  income  exceeds 
the  sum  of  (a)  $5,000  and  (b)  eight  per  centum  of 
the  actual  capital  invested. 

Every    foreign    corporation    and    partnership.  Foreign 
including  corporations  and  partnerships  of  the  and^lS'tner^ 
Philippine  Islands  and  Porto  Rico,  shall  pay  for  ships 
each  taxable  year  a  like  tax  upon  the  amount  by 
which  its  net  income  received  from  all  sources 
within  the  United  States  exceeds  the  sum  of  (a) 
eight  per  centum  of  the  actual  capital  invested  Actual 
and  used  or  employed  in  the  business  in  the  United  ^^^^^  i^' 
States,  and  (b)  that  proportion  of  $5,000  which  United 
the  entire  actual  capital  invested  and  used  or  em- 
ployed in  the  business  in  the  United  States  bears 
to  the  entire  actual  capital  invested;  and  in  case  no 
such  capital  is  used  or  employed  in  the  business 
in  the  United  States  the  tax  shall  be  imposed  upon  Actual 

that  portion  of  such  net  income  which  is  in  excess  Capital 

.    ,  -  /   \     .   1  •    ,  not  Invested 

of  the  sum  of  (a)  eight  per  centum  of  that  propor-  in  United 

tion  of  the  entire  actual  capital  invested  and  used  States 

or  employed  in  the  business  which  the  net  income 

from  sources  within  the  United  States  bears  to 

the  entire  net  income,  and  (b)  that  proportion  of 

$5,000  which  the  net  income  from  sources  within 

the  United  States  bears  to  the  entire  net  income. 

[15] 


il 


•'Actual 
Capital 
Invested" 
Defined 


Computation 
of  Tax 


Income  Tax 
Return  as 
Basis  of 
Assessment 


Partnership 
Fixing  Fiscal 
Year 


Adjustment 
of  Tax  where 
Returned 
Prior  to 
March  1,1918 


Sec.  202.  That  for  the  purpose  of  this  title, 
actual  capital  invested  means  (1)  actual  cash  paid 
in,  (2)  the  actual  cash  value,  at  the  time  of  pay- 
ment, of  assets  other  than  cash  paid  in,  and  (3) 
paid  in  or  earned  surplus  and  undivided  profits 
used  or  employed  in  the  business;  but  does  not 
include  money  or  other  property  borrowed  by  the 
corporation  or  partnership. 

Sec.  203.  That  the  tax  herein  imposed  upon 
corporations  and  partnerships  shall  be  computed 
upon  the  basis  of  the  net  income  shown  by  their 
income  tax  returns  under  Title  I  of  the  Act  en- 
titled "An  Act  to  increase  the  revenue,  and  for 
other  purposes,"  approved  September  eighth, 
nineteen  hundred  and  sixteen,  or  under  this  title, 
and  shall  be  assessed  and  collected  at  the  same 
time  and  in  the  same  manner  as  the  income  tax 
due  under  Title  I  of  such  Act  of  September  eighth, 
nineteen  hundred  and  sixteen:  Provided,  That 
for  the  purpose  of  this  title  a  partnership  shall 
have  the  same  privilege  with  reference  to  fixing 
its  fiscal  year  as  is  accorded  corporations  under 
section  thirteen  (a)  of  Title  I  of  such  Act  of  Sep- 
tember eighth,  nineteen  hundred  and  sixteen: 
And  provided  further.  That  where  a  corporation  or 
partnership  makes  return  prior  to  March  first, 
nineteen  hundred  and  eighteen,  covering  its  own 
fiscal  year  and  includes  therein  any  income  re- 

[16] 


ceived  during  the  calendar  year  ending  December 
thirty-first,  nineteen  hundred  and  sixteen,  the  tax 
herein  imposed  shall  be  that  proportion  of  the  tax 
based  upon  such  full  fiscal  year  which  the  time 
from  January  first,  nineteen  hundred  and  seven- 
teen, to  the  end  of  such  fiscal  year  bears  to  the 
full  fiscal  year. 

Sec.  204.  That  corporations  exempt  from  tax  Corporations 
under  the  provisions  of  section  eleven  of  Title  I  andPartner- 
I.    1        A  1  r^  •   1    1         •  shipsExempt 

oi  the  Act  approved  September  eighth,  mneteen 

hundred  and  sixteen,  and  partnerships  carrying 
on  or  doing  the  same  business  shall  be  exempt 
from  the  provisions  of  this  title,  and  the  tax  im- 
posed by  this  title  shall  not  attach  to  incomes  of 
partnerships  derived  from  agriculture  or  from 
personal  services. 

Sec.  205.  That  every  corporation  having  a  net  Statement  of 
income  of  $5,000  or  more  for  the  taxable  year  ^^^^^, 
making  a  return  under  Title  I  of  such  Act  of  Sep-  invested  by 

tember  eighth,  nineteen  hundred  and  sixteen,  shall  Corporation 
«,  Pi-»i»ii»  1  tobeincluded 

tor  the  purposes  oi  this  title  include  m  such  return  in  Return 

a  detailed  statement  of  the  actual  capital  invested. 

Every  partnership  having  a  net  income  of  $5,000  Return  of 
or  more  for  the  taxable  year  shall  render  a  correct  Partnership 
return  of  the  income  of  the  partnership  for  the 
taxable  year,  setting  forth  specifically  the  actual 
capital  invested  and  the  gross  income  for  such 
year  and  the  deductions  hereinafter  allowed. 
Such  returns  shall  be  rendered  at  the  same  time 

[17] 


Deductions 
allowed  Part- 
nership 


Administra- 
tive, Special 
and  General 
Provisions 
of  Law  made 
Applicable 
Hereto 


Regulations 


Production 
of  Inform- 
ation and 
Data 


and  in  the  same  manner  and  form  as  is  prescribed 
for  income-tax  returns  under  Title  I  of  such  Act 
of  September  eighth,  nineteen  hundred  and  six- 
teen. In  computing  net  income  of  a  partnership 
for  the  purposes  of  this  title  there  shall  be  allowed 
like  deductions  as  are  allowed  to  individuals  in 
sections  five  (a)  and  six  (a)  of  such  Act  of  Septem- 
ber eighth,  nineteen  hundred  and  sixteen. 

Sec.  206.  That  all  administrative,  special,  and 
general  provisions  of  law,  including  the  laws  in 
relation  to  the  assessment,  remission,  collection, 
and  refund  of  internal-revenue  taxes  not  hereto- 
fore specifically  repealed  and  not  inconsistent  with 
the  provisions  of  this  title  are  hereby  extended  and 
made  applicable  to  all  the  provisions  of  this  title 
and  to  the  tax  herein  imposed,  and  all  provisions 
of  Title  I  of  such  Act  of  September  eighth,  nine- 
teen hundred  and  sixteen,  relating  to  returns  and 
payment  of  the  tax  therein  imposed,  including 
penalties,  are  hereby  made  applicable  to  the  tax 
required  by  this  title. 

Sec.  207.  That  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  make  all  necessary  regulations  for 
carrying  out  the  provisions  of  this  title,  and  may 
require  any  corporation  or  partnership  subject  to 
the  provisions  of  this  title  to  furnish  him  with  such 
facts,  data,  and  information  as  in  his  judgment  are 
necessary  to  collect  the  tax  provided  for  in  this  title. 
[18] 


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Caylord  Brom. 

NIafcera 
Syracuse.  N.  Y. 


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